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Computerized Investing > Second Quarter 2013

Online Discount Brokers

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by Joe Lan, CFA

As a member of AAII and reader of Computerized Investing, chances are that you perform a significant amount of investing on your own. Though individual investors still call full-service brokers to place trades, many have now switched to fully using online discount brokerages. These online brokers have a number of advantages over “traditional” brokers, such as cost and convenience, and they are constantly evolving and improving. Most online discount brokerages charge $10 or less per trade, but there are some online deep discount brokerages that charge just a few dollars per trade.

Since most online brokerages are similar in pricing, the difference between each lies in the features and research that they provide. Like last year, this year’s online brokerage comparison provides an in-depth analysis of the features most individual investors use. I also point out some notable differences between the various brokers and highlight each broker’s strengths and weaknesses. In addition, I provide a clear calculation of the difference in pricing between the commonly used online brokers and deep-discount brokers.

AAII Broker Survey

Each year, we aggregate member responses for the AAII Online Discount Broker Survey and detail the results on our website at www.aaii.com/brokersurvey. Members who participate in the survey are asked to fill out a questionnaire regarding broker reliability and quality, along with individual questions concerning investor trading frequency, securities traded and portfolio size.

The survey results for 2012 are shown in Table 1. The five brokers that our members used the most were Scottrade, Fidelity Investments, Charles Schwab, TD Ameritrade and Vanguard. Vanguard replaces E*Trade Financial this year as the fifth most widely used broker by AAII members. In fact, Vanguard saw a big jump in use this year, while E*Trade slid significantly.

Although no level of security is completely safe, the top online brokerages all use high-level encryption (typically bank-level encryption) that is extremely difficult to break. All online brokerages dedicate a portion of their websites to explaining the measures they use to protect your assets and transactions, and it is worth your time to find and read through this information. In addition, when choosing a broker, make sure it is insured by the Securities Investor Protection Corporation (SIPC). The SIPC insures up to $500,000 per brokerage customer, including a maximum of $250,000 for cash claims.

To participate in our broker survey, visit www.aaii.com and select Surveys from the Quick Links tab. The survey is open year-round, and we look forward to your input.

What Investors Look For

AAII’s Broker Survey also provides some insight on what our members are looking for in an online discount broker. The overwhelming majority responded that commissions are the primary factor when selecting a broker, with services and convenience placing second and third, respectively. As a secondary factor, responders mentioned convenience the most, with commissions and services placing second and third.

Comparing the Brokers

Each of our top online brokers has its own strengths and weaknesses, though their offerings are not far apart. Still, there are several important items to keep in mind when considering a broker.

Trading Platform

For do-it-yourself investors, the trading platform is an essential consideration. Most online brokers offer two separate trading platforms—one for regular users and one for “power” users. It should be noted, however, that Vanguard does not have an active trading platform.

Trading platforms for regular users are all relatively similar. Web-based platforms are used by each of the brokers in this comparison, and they can handle stocks, mutual funds, exchange-traded funds (ETFs), options and bonds. To execute a trade, users need to specify the action type, number of shares, ticker symbol, order type and order duration. Each broker allows you to place market and limit orders, and each usually also offers to handle stop, stop-limit and trailing stop orders. In addition, users can select whether the order is good until cancelled or only good until the end of the trading day.

Where the brokers differ is in their trading platforms designed for power users. Power users are defined as investors who either have a large portfolio size or make a large number of trades in a period. These users are given access to a broader array of trading tools, such as real-time price quotes and volume data. In addition, most will offer more advanced investing tools, such as the ability to backtest or chart technical indicators.

Cost per Trade

AAII’s broker survey provided a useful piece of insight—members who use discount brokerages still mention commissions as the primary factor when choosing a broker. Therefore, it may be beneficial to take a moment to discuss the differences in cost between the various online discount brokers. Since most online brokerages offer trades for under $10, cost is no longer much of a concern. Recently, however, an increasing number of deep-discount brokerages with respectable features and capabilities have popped up. Though none of the deep-discount brokerages made it into the top five on the AAII member ranking, there is no doubt that these types of brokerages are viable options. In fact, one deep discounter, Interactive Brokers, places seventh in terms of popularity. Investors making frequent smaller trades may want to consider these deep-discount brokerage services.

For example, consider a service such as Interactive Brokers that charges $0.005 per share with a minimum of $1.00 per trade and maximum of 0.5% of trade value. In other words, this broker allows you to trade up to 200 shares of any stock for $1.00, which is especially useful for investors looking to start a portfolio of a large number of stocks with limited funds. For instance, an investor looking to invest $25,000 into AAII’s Model Shadow Stock Portfolio might turn to an online discount brokerage such as Scottrade that charges $7 per trade. To keep the calculation simple, let us assume that the Model Shadow Stock Portfolio has 25 holdings (it currently holds 29). In order to invest equal amounts in 25 different stocks with $25,000, each holding must be $1,000. At $7 per trade, each buy and subsequent sell would equate to a 1.4% commission per trade. Using Interactive Brokers, each buy and sell would only be 0.2% (assuming each trade is 200 shares or less).

Research Data and Tools

The top online brokers all provide fundamental data and research tools to investors looking to perform due diligence before purchasing an investment holding. Their data is comprehensive and typically comes from trusted data sources, such as Morningstar and Thomson Reuters.

The top online brokers all offer some form of charting with the ability to do simple technical analysis. At the very least, price and volume data is provided, and chart options typically include line, open-high-low-close and candlestick. The best brokers also offer the ability to plot several stocks on a single chart and to add technical indicators. One interesting feature to look for is the ability to chart company events, such as dividends and earnings, to see how the stock price has reacted to these events.

Financial statement data is also provided by all the brokers that are reviewed in this article. In addition, earnings data going back several periods, insider activity and consensus earnings estimates going forward are all offered.

A myriad of investment tools are also available at the broker websites. The top brokers all offer some level of screening capabilities, as well as tools to help users examine their portfolios as a whole.

The Top Brokers

The top online discount brokers differ in what they offer beyond basic screening and simple portfolio tracking tools. I discuss the specific features of each below.

Scottrade

For the third year in a row, Scottrade placed at the top of our list for most frequently used online discount brokerage firm. However, this year Scottrade had company, tying with Fidelity for the top spot, with each broker taking 16.91% of the votes.

The main Scottrade page lists the most vital information on your portfolio such as account value, funds available for trading, open and complete orders and current positions, plus a watchlist. A performance graph is also available that allows investors to see short-term performance.

Scottrade provides a wealth of research information for account holders. Simply type a ticker symbol in the “Detailed Quote” box to pull up research information on individual stocks. The summary tab offers the latest company news and presents the upcoming dividend payment information. In the fundamental tab, data elements are broken down into several categories—profitability, valuation, financial strength and management effectiveness, just to name a few. In addition, Scottrade presents median figures for company peers and the industry average for each of the data points offered. The broker also offers earnings data going back seven quarters and offers estimates for two upcoming quarters. Annual and quarterly financial statement data is provided for the past five periods.

Scottrade offers some simple technical analysis capabilities. After clicking on the charts tab from the summary page, users can specify the type of investor they are—long-term investor, medium-term investor, medium-term trader, short-term trading or intraday trader—and the price chart will be tailored to the chosen type, presenting the appropriate technical indicators. Scottrade also allows users to chart events, such as earnings and dividends. Users can compare one stock to other stocks and major indexes, as well as to market sectors, fixed income, commodities and currency rates, all on the same chart. A new feature integrated into Scottrade’s technical analysis capabilities is SmartText, which explains the information shown on the charts in “plain English.” An example of Scottrade’s SmartText is shown in the figure on page 23.

Research reports are often of central importance for individual investors. Different brokers typically offer different research reports. Scottrade provides the full S&P Capital IQ Stock Report, Thomson Reuters StockReport+ and Second Opinion Weekly Report.

The analyst views section shows S&P star ranking and Briefing.com rating changes for securities. A chart details the ratings changes and links to a PDF file giving the reason for the change.

A service that Scottrade added recently is personal banking. Scottrade now offers checking, savings and money market accounts as well as online bill pay service. In addition, since Scottrade does not have ATM machines, the company will reimburse you for fees you are charged when using ATMs.

Scottrade provides a robust knowledge center (one of the best) that offers educational articles on a range of personal finance needs. The broker offers a tax guide that is fairly comprehensive, providing new information yearly. In addition, retirement calculators, an IRA comparison and a life-events adviser can all be found in this area.

Fidelity Investments

After a few years in the number two spot, Fidelity tied with Scottrade in 2012 as AAII members’ most frequently used online discount broker.

After logging into the Fidelity website, you are given a listing of your accounts, along with subtotals for each and a total portfolio value.

Several tabs are available on the main page. The portfolio positions tab breaks down your holdings and presents all the usual data for each, including per share and total cost basis and dollar and percentage change since purchase. Fidelity also offers BillPay, which, as the name suggests, enables you to pay bills directly from your Fidelity brokerage account.

A quick overview of your portfolio is provided in the analysis tab. The page provides your asset allocation along with your top positions and a style and sector map. Data is broken down between stock and fixed-income holdings, providing a deeper analysis of your asset allocation. In the ratings sub-tab, Fidelity presents mutual fund ratings, equity summary scores and bond credit ratings for your current holdings.

The research section provides a quick snapshot of the tools available to Fidelity users, such as a one-year chart and the latest news and analyst research reports. Reports are offered by First Call, Thomson Reuters, Standard & Poor’s, Ned Davis, Jefferson Research and Zacks, just to name a few. This research page also provides a link to the alerts page, where users can sign up for a variety of portfolio alerts to assist in keeping on top of investments.

Fidelity also provides advanced research functionality on individual stocks. Users can draw charts by hand and plot almost 50 different technical indicators directly on the price and volume graph. Events such as dividends, splits and earnings can be charted to see how the announcement of each affected the share price. You may also chart the Dow Jones industrial average, NASDAQ composite index or S&P 500 index and up to 25 other companies on the same chart. A separate technical analysis section presents short-, medium- and long-term technical signals for each company.

Another useful feature Fidelity offers is the ability to compare up to five companies side by side. Users can choose to compare key statistics, dividends, valuation measures, performance and volatility data, growth figures, profitability ratios, cash and debt numbers, ownership and trading characteristics, and intraday price and volume data.

Fidelity’s news & insights area provides the most comprehensive news area of the brokerages that are reviewed in this article. The news section is divided into U.S. markets, U.S. economy & jobs, technology, international, company news, IPOs, mergers & acquisitions and investment ideas. A separate page of news videos is also offered. Furthermore, the news sources are top financial websites such as MarketWatch, CNN Money and Reuters. The insights section provides analysis on recent market trends and areas where you might find growth.

Several tools on the site are worth highlighting. The Fidelity Income Strategy Evaluator is a useful retirement planning tool. The program asks you to input a general idea of your income and expenses in retirement, information about accounts held elsewhere that will be included as retirement assets and your current pretax income. The tool then provides an estimation of your monthly income based on your holdings. A suggested target income mix is provided that takes into consideration your needs and preferences. Furthermore, an idea of how your portfolio will perform in both bull and bear markets is displayed. A screening tool is also offered for stocks, preferred securities, ETFs and closed-end funds.

Charles Schwab

Charles Schwab implemented a completely new look and feel for its brokerage page since last year’s review. The current home page is much cleaner, simply offering the value for each account and daily change. The accounts area provides all relevant information for the current holdings in your account, including balances, positions, performance and history. Additionally, the portfolio performance page shows a breakdown of your current portfolio and provides some tips: Your current asset allocation is compared to your target risk profile, and suggestions are made as to what you can do to bring your current asset allocation more in line with your target. Your target allocation can be changed by answering a quick questionnaire on your investing traits. Furthermore, you can see a breakdown of your portfolio’s diversification and equity concentration. The quality section provides ratings for each of the holdings in the portfolio. Yellow exclamation points are displayed in potential problem areas. Otherwise, a green “ok” is displayed.

Using Charles Schwab’s Web-based platform to trade stocks is very simple, but in previous reviews, we noticed that the order page lacked price and volume information which, in our opinion, is vital to know, especially for smaller-cap stocks. During the year, though, Charles Schwab has rectified the omission and now the order page provides bid and ask prices, as well as volume.

Transfers & payments is a separate section in the accounts area. This section allows users to transfer and wire funds, request checks, pay bills and add external accounts. You may also manage external accounts in this section, though we were unable to test this feature.

The scope of the market research data available at Charles Schwab continues to be very international. Global research is provided by Credit Suisse and includes reports for various global industries. International performance data is available for a number of countries and regions. Charles Schwab also provides asset allocation guidelines for international investing. Furthermore, a number of high-quality research reports are available for domestic industries and sectors, including from notable analysts such as Argus Research, JPMorgan, Briefing.com and Ned Davis. Charles Schwab also provides its own research reports.

Charles Schwab offers a variety of methods for researching and choosing individual stocks, including a stock screener, company fundamental research data, expert advice and stock lists that show top-rated stocks by sector, asset class and Schwab Equity Ratings. The stock screen provides a universe of just over 6,500 domestic stocks and international stocks (as ADRs, or American depositary receipts). Charles Schwab provides screeners for both mutual funds and ETFs. Fundamental research on mutual funds and ETFs is extensive, rivaling that offered for stocks. Fund comparisons present mutual fund scorecards side by side. In addition, funds can be compared by performance and Morningstar ratings. The Schwab Mutual Fund Report Card, free for customers, is a two-page report that provides extensive research information for a mutual fund.

Charts are comparable to the other top brokerage websites, allowing users to compare a firm against other companies, sectors and indexes going back 10 years. A twist that Schwab offers is the charting of fundamental indicators, such as rolling dividend yield, price-earnings ratio range and rolling earnings per share. Users can also draw trendlines and crosshairs by hand. In addition, Schwab also allows users to chart momentum, trend and volume indicators.

TD Ameritrade

The TD American main page remains the same as last year, with portfolio positions and account balances presented on the home page, along with your watchlist, order status, messages and the major domestic indexes. The positions “heat graph” shows how your positions fared during the day in your overall portfolio.

When purchasing shares, TD Ameritrade allows you to place conditional orders, which allows you to combine multiple orders. For example, you can set a condition where execution of the first order will prompt cancellation of the second order, or where execution of the first order prompts execution of the second order. TD Ameritrade is able to handle stock, ETF, options, bond, mutual fund, and even futures and forex (foreign exchange) trades.

The brokerage also provides a wealth of investment research. The market overview section is separated into five distinct sections: U.S. markets, global markets, commodities, currencies and fixed income. A calendar is presented on the right-hand side of the page that shows economic events, dividends, splits, earnings, IPOs and ratings changes. Sector outlooks are provided by Standard & Poor’s.

TD Ameritrade offers analyst reports from Credit Suisse, TheStreet.com, Standard & Poor’s, Ford Equity Research, MarketEdge and Jaywalk Consensus for individual stocks. Additionally, the broker offers ResearchTeam reports, which provide company ratings based on a combination of the reports offered by five third-party research teams.

The technical analysis capabilities provided by TD Ameritrade are similar to those offered by the other top brokers, including a variety of charting types and upper and lower indicators. Users can compare companies and chart events such as earnings, dividends and splits.

The valuation tab offered at TD Ameritrade is relatively unique. This area of the website allows users to compare the valuation measures, profitability ratios, dividend ratings, growth rates, effectiveness gauges and financial strength figures for a company against its industry, the overall market or competitors.

In addition to screeners for stocks, mutual funds and ETFs, TD Ameritrade also offers an options screener. The options screener is simple, but allows you to specify search criteria such as the strategy type (covered call and calendar spread are the only two options), whether the strategy is in-the-money, downside protection values and days-to-expiration. If you are a frequent options trader, it may be worth taking a look at this feature.

TD Ameritrade offers one of the best sets of trading tools available on the Web. In addition to its regular trading platform, which caters to serious fundamental investors, the website offers Trade Architect, aimed at active investors, and thinkorswim, which targets sophisticated active investors. Trade Architect is a Web-based trading platform. It offers several advantages over the regular trading platform, such as visual position profit/loss analysis and streaming Dow Jones and CNBC news. The thinkorswim trading platform needs to be installed on your computer. However, it offers the ability to trade complex options, futures and forex. You are also able to perform paper trades.

Beyond trading tools, TD Ameritrade also offers several investment tools designed to assist investors in building and maintaining a suitable portfolio. Portfolio Planner helps you set up a target asset allocation, but the tool goes one step further and aids in choosing securities in each particular asset class. In addition, the site offers WealthRuler, a simulation engine for retirement planning. A user enters their retirement timeline—which includes current age, when they plan on retiring and projected retirement period—current assets, future cash flows and tax information. WealthRuler then runs a series of simulations to determine whether the user’s retirement goals are likely to be met.

Vanguard

Vanguard is a complete newcomer on our list of top brokers. In fact, E*Trade fell to a distant sixth; only 4.95% of AAII survey responders use E* Trade, compared to 7.63% for Vanguard. Like the other top brokerages, Vanguard displays account information on the main page, including account balances, recent transactions, asset mix and personal performance. The main page also provides a target asset mix suggested for people in different age groups (typically more conservative for older investors).

Vanguard’s fee schedule varies depending on the value of assets held at the firm. For investors with less than $50,000, the first 25 trades per year are charged $7, and the fee for subsequent trades is $20. For accounts valued at $50,000 to $500,000, all trades cost $7. Accounts valued at $500,000 to $1 million are entitled to $2 trades and accounts over $1 million receive 25 free trades a year with all subsequent trades charged $2.

The brokerage generates a comprehensive portfolio analysis that presents asset allocation, stock and bond analysis, and costs, taxes and manager risk. In addition to the target asset allocation recommended by Vanguard based on age, the site also uses a questionnaire to generate a more personal target asset allocation.

For individual securities, Vanguard offers a decent amount of data. Company analyst reports are provided by Standard & Poor’s, First Call Consensus and Thomson Reuters. Financial statement items are presented for the previous four quarters and years. Going forward, Vanguard provides earnings estimates for the next two quarters and next two fiscal years. The stock screening tool, however, is very simple and investors who frequently rely on stock screens should probably look elsewhere.

One of the main advantages of having a Vanguard brokerage account is being able to invest in Vanguard ETF funds without commission (most Vanguard mutual funds are no-load but charge a commission). Vanguard mutual funds typically have low expense ratios, so purchasing these funds through a Vanguard brokerage account keeps the costs at a minimum. Vanguard has a variety of funds to choose from that allows investors to easily diversify their portfolio internationally and across all market capitalizations.

Conclusion

Online discount brokerages have been popular with individual investors now for a number of years, due to their low commissions and the convenience they provide. The top five online brokers reviewed here offer similar features. When it comes down to it, the choice may depend on individual preference for research reports, tools or customer service. Keep in mind that if you are unhappy with your broker, switching brokerages is simple. Typically, you can call your new brokerage service and they will complete the switch for you. However, it is likely that you will be unable to trade for a few days during this process.

Recently, AAII’s Broker Survey has also shown an increase in members trading at “deep-discount” brokers, ones that charge just a dollar or two for trades. For most individual investors, the added savings per trade may not be worth switching to a new brokerage services. However, for those looking to invest a limited amount of funds into a portfolio of many stocks, these deep-discount brokerages may be preferred.


Discussion

Steve Atwell from CA posted about 1 year ago:

There's an error in the fee information for Vanguard. The fees aren't based on the value of the assets in your account, but the value of Vanguard mutual funds and ETFs held in your account.

The fee structure is good for people who mainly invest in Vanguard funds and also want to hold some additional assets. (If you want index funds, it's hard to go wrong with Vanguard's offerings.) But if you don't plan to hold significant chunk of Vanguard funds, the fee structure is such that you're probably best off with another broker.


Tony Armendariz from CA posted about 1 year ago:

I disagree that cost is no longer an issue with commissions in the $8-10 range.

When I was starting with small, short term, trades (Gorilla Trades), an investment of $1000 immediately loses 1.6% with the $8 buy & sell commissions.

For that reason and a trading agility reason, I switched to MBTrading.com for my smaller, faster trades. MBTrading has a rate plan of $0.01/share or 1$ minimum. For the $1000 trade, this costs me 0.2%.

The agility feature (Scottrade doesn't have it) allows me to set up a Buy Limit with automatic stop loss/take profit order ("TTO") before the market opens, and let my strategy unfold automatically.

Tony

(Yes, I do use Schwab, TDAmeritrade, etc for bigger longer term stuff).


Bill from IL posted about 1 year ago:

Does anyone have any thoughts about Interactive Brokers? Would appreciate your input.


PrescottJer from AZ posted about 1 year ago:

Maybe I missed it, but it would be helpful and possibly important to know the total number of respondents that produced the results stated.


Robert Emerson from FL posted about 1 year ago:

In response to Bill, I have used Interactive Brokers for over 5 years, and could not be more pleased. Their fees are incredibly low ($1) for up to 200 shares, their executions often result in a superior price for me, their platform although somewhat overwhelming to begin with is complete, yet easy to use, their range of financial instrument offerings is complete including not only stocks and options, but also bonds, futures contracts, and currencies. I have only used them for stocks and options, however. An interesting feature is the ability to trade on a number of different exchanges around the world, not just the US. I have yet to have a complaint of any sort with them. Their customer service is also excellent.


Peter Asprey from WA posted about 1 year ago:

"Since most online brokerages offer trades for under $10, cost is no longer much of a concern."

It is beyond me why folks would think this. If I can pay $1.00 instead of $10.00 WHY would I NOT pay less? I have accounts with three of the brokers listed, AND with IB. I've used IB for 99% of my trades. The primary investing system I use blends investing (long term) with trading (short term) and produces MANY small trades (diversification). Years ago, when still inventing this stocks-only (no options) system, I tried it with Fidelity, at about $8.00 per trade. The commissions ate so much of the profits, that the system was only marginally successful. IB's $1.00 trades made all the difference.

That said, if I was trading a several million dollar account, commissions wouldn't make much difference. But, after using the IB platform for several years, I'd still go with them. They get a "good" or better for every item on my checklist, and an OUTSTANDING for cost in the 1-10 lot purchases. Nobody even close.

BTW, the system referred to as "TtP-S" is totally free and developed by about 400 members--represented by a Yahoo Group of the same name.


Mark Sullivan from CA posted about 1 year ago:

Wow, a new online broker in the top 5. Usually it is just a shuffling of the usual most marketed brokers. AAII does a really disservice to it members with Top Five broker articles and only perpetuates those that have big marketing budgets. There is nothing "top five" about being the most used by members. AAII needs to get off its but and do some proper evaluations of online brokers. Set up some criteria and evaluate brokers in categories like best to start with if you have only $25,000, best bang for the buck, best stock tools, and best for buying bonds. Just because a online broker is not used the most by members doesn't mean it is the best, probably just the best marketed and that cost $$$ which you pay for.
Like others have said "$8.00 does matter". The one thing traders can control is cost.

I use TradeKing and love it @ $4.95 a trade no matter what the amount. Customer service is also great. Though I am always interested in other brokers none of which are in the top five.

AAII is suppose to be teaching its members how to invest not writing marketing articles for big online brokers.

By the way I love Joe Lan articles. They are great reads and very educational. I am surprised he was given the task to write the regular "top five" most used broker article.


John Ciak from NJ posted about 1 year ago:

Robert Emerson: Isn't there a monthly fee with Interactive Brokers, though? If so this makes them prohibitively expensive for less frequent traders.


S. Desai from TX posted about 1 year ago:

There are several topics missing in this review:
1) options screening, options tools and strategies. A comprehensive review of options screening which also includes the screen for underlying instrument is desired.
2) comprehensive screening for preferred stocks and MLPs. This is very valuable for those who want high yield.
3) margin rates. For example, Schwab quoted me 6.8% margin rate for margin over $100,000 while Fidelity gave me a margin rate of 2%! This makes a huge deal because I buy high dividend paying low beta stocks or preferred stocks on margin, and sit tight.
4) high quality paid and free 3rd party research is a big deal. For example, Can I buy research from Goldman or Lazard or FBR (to name a few) etc. Or from who else?
5) Tools training. Investor education is very useful for "self directed" investors. Which broker offers a comprehensive training program to teach its customers?
6) A very highly desirable feature that I don't see any broker offer is daily computation of Sharpe Ratio, Jensen's ALpha, and Treynor's Ratio of my existing portfolio. How would my portfolio's Sharpe Ratio change if I added/removed a particular stock or bond from my portfolio? What is my total return between any two dates so that I can "benchmark" my performance against that of other money managers or index?


Samir Desai from TX posted about 1 year ago:

Two people have praised IB in the commentary section. I believe that $1 or $10 commission does not make as much difference unless I am trading thousands of trades per year.
Being on the "right side" of the trade is far more important than the commission difference of $8 ("law of marginal utility or benefits" in economical sense).
I tried the IB platform. Yes, the trade is cheaper but everything else is cheaper...err poorer too with IB. I spoke with multiple IB customer service reps who were trash talking and condescending. The customer service hours are limited. Research is non-existent. And the platform is NOT superior. IB claims that their execution is better. Nonsense. I have had better results in my execution on Schwab and Fidelity platforms (between the bid-ask spreads) without much problems. In the US, it is impossible to get rid of the market maker (for reasons that would start a whole new topic). Many other exchanges in the world don't force the buyers and sellers to trade with the market-maker. Most buyers and sellers don't even know that in the US, they don't actually trade with any counter-party. They are just trading with the market-maker! So IB doesn't offer any special advantage in that. I would not recommend IB unless I live near their Chicago Headquarter. On google, search "Interactive Brokers Experience," you will find scores of people have listed that during the periods of high volatility, IB liquidated customer's stocks even when there was no margin call or the customers' were not given even a minute to decide which stocks to sell due to cover a margin call.

Other brokers don't provide analytics on my portfolio, IB doesn't either. For a large partfolio, analytics matter far more than trading cost.


Paul Findley from CA posted about 1 year ago:

IB Broker has a $10 monthly minimum charge. So if you do two trades, you'll pay $2 in commissions and $8 to make up the minimum.


bluescreen from california posted 11 months ago:

To Paul:
the $10 montly minimum is a fee to have realtime quotes. When I opened my account with IB I knew I was not going to trade much for several months, so I did not subscribe to realtime quotes, and was not charged the $10/monthly.
Whenever I had to buy or sell something, I would look up the quote on a different broker account, yahoo, or bloomberg. Not being able to see the realtime bid/ask at IB probably caused me to have to lose a point or two in the execution prices, but if that is a concern you probably are an active trader, and probably trade way more than enough to avoid the realtime quotes fee.
So far I am very happy with Interactive Brokers.
Having most of the time both the IB trader and TDAmeritrade's Think or Swim open next to each other, i have the impression that quotes update a little earlier on IB than on Think or Swim (guess their real-time is more real).


jerry medow from Illinois posted 11 months ago:

errore on schwab- my fee for as many shares as I want to buy is 6.95-also no mention of streetsmart edge-the top platform-used by schwab


Peter Asprey from CA posted 11 months ago:

Sorry, I should have remarked about IB's "Activity Fee Minimum." If you place NO trades in a month, it is $10.00/month. That means they expect $10.00 per month in commissions. If you trade Five round-trip trades, the activity fee is $0.00. If you sat on your, ah, hands for a whole year, you WOULD pay $120. If you made one trade a month (12 RT trades at your $10.00/per trade, no activity fee broker), you'd pay $240 in commissions. If you did the same at IB, it would be $120. If you scale up to say, 10 RT/month, it would be $2400 vs $240. For large accounts, who cares. For the rest of us...it matters. I have better uses for my extra $2,200.

I can't comment on the analyticals and customer support, except that in several years I've never needed CS. For those doing complex options trades and such, perhaps a specialist is worth it. I use Schwab's OX for my (infrequent) option trading.

If you're borrowing money ("margin") in quantity, those rates could dwarf everything. I don't use margin for my current trading systems.

OF COURSE, YMMV, and I think this discussion is useful. I also think that "top 5" analysis is NOT useful. They are all more or less equivalent, and the specialist brokers are left out.

Pete A
Bellingham, WA
10-26-13


James Perry from IL posted 11 months ago:

I agree with Peter the fees are much lower at IB. Your article focuses on full service/cost online brokers that were cheap 10 years ago but today they are expensive. People who invest on their own and have done so for several years do not need services that Fidelity and ETrade offer. They would save money by switching (from Etrade) if they do more than one trade on average per month.


James Perry from IL posted 11 months ago:

Oh, one more thing... Next time you do the survey you should include some other brokers besides the four listed above.


Vernon Roberts from FL posted 11 months ago:

The older I get, I guess the dumber I get.
One reason, I access articles like this less and less, is because everyone seems to be more interested in tracking everyone and in advertising than in providing information.

I *thought* this was a current article. However, I don't know WHEN it was written! So of what use is the information?
Saturday, October 26, 2013: date of Computerized investing link to this article.
Second Quarter 2013 : only date I see at the top of the web page.
Discussion
Steve Atwell from California posted 7 months ago:
......
How can someone comment on a Current article 7 months ago?
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It would be nice before I waste my time if a date of the "advertised" article (i.e.-in the email) would give a DATE of when the information was originally presented. (admittedly, I generally just download the pdf so not sure if I'm wrong on this)
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As to the depth or usefulness of the information, I agree with several of the comments above. If you compare what is presented in this "spreadsheet" with the information presented in the 2007 version (25 or so brokerage firms with indepth comparison table), one can see how things (i.e-regard presentation and usefulness) have changed.

Hope everyone has a great day and lots of sucess.


J Morlock from NJ posted 11 months ago:

I have been a Fidelity customer for the past 15 years and I have quite satisfied until they made a change in the way they calculate and report gains and losses on an investment.

Since January 2012, Fidelity has been calculating an investors cost basis using use the market price of acquired shares at the time they are acquired instead of using the actual amount the investor paid for the shares. The result is that reports of gains and losses are mis-stated / incorrect.

The problem is readily apparent when looking at dividend re-investments. When re-investing dividends an investors true cost of acquiring shares is zero, However, Fidelity calculates and reports the cost it at the market price on the date the shares are re-invested. This overstates the investors true cost of acquiring shares, understates reported gains, and it can show looses where there are investment gains.

I believe Fidelity made this change to reflect an investors tax cost basis (instead of an investors true cost ) because Fidelity doesn't have the capability to provide both sets of data.

An argument can be made to show the tax cost basis in an taxable account but I see no rationale argument to do so in an tax deferred account like an IRA where investors are not taxed on shares bought or sold.

I have called Fidelity several times to get this problem fixed but it has not happened as of this Oct 2013. I hope this posting will prompt other Fidelity customers to review there reports and call Fidelity to request this problem be fixed.




J Morlock from NJ posted 10 months ago:

Fidelity Update Nov 2013: I am pleased to report that Fidelity has just updated the cost basis of the positions in my retirement accounts so that reports of gains and losses reflect the actual cost I paid. Here is the message I received from them.

From: Fidelity
To: James Morlock
Topic: Account services and features
Subject: RE: Mistatement of Gains and Losses on Fidelity Investment Reports
Date: 11/18/2013 10:00 AM

Dear Mr. Morlock:

Thank you for correspondence dated October 28, 2013, regarding the cost information for your retirement accounts. I appreciate the opportunity to respond.

We updated your retirement accounts to track the position cost rather than taxable cost.

I sincerely apologize for your frustration caused by the enhancements made to our cost tracking system. I understand that these changes did not meet your expectations and assure you that this was not our intent. We believe that offering a superior customer experience is at the core of our continued success.

Mr. Morlock, we value your taking the time to share your thoughts with us.


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